Will Microsoft Respond to Yahoo Letter to Icahn?

Throughout this new series of developments in the Yahoo (YHOO) takeover circus, Microsoft (MSFT) has been unusually quiet about billionaire investor Carl Icahn’s efforts to take over Yahoo’s board via a proxy fight and then turn around and make a deal to sell the company to the software giant.

But will that last, especially considering a letter that Yahoo Chairman Roy Bostock wrote yesterday in response to Icahn’s missive about launching his bombs at Yahoo’s top brass?

Several sources at Microsoft said the company is mulling over whether to write its own letter to counter the points Bostock made in his letter responding to Icahn’s letter, which would essentially call Bostock’s out as a slanted and inaccurate version of the Microsoft-Yahoo talks.

It is quite obvious that Microsoft’s bid of $33 per share is a superior alternative to Yahoo’s prospects on a standalone basis. I am perplexed by the board’s actions… I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.”

The letter Bostock wrote back yesterday too, in part, outlined Yahoo’s version of the meetings with Microsoft:

Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal…We have been crystal clear in our stance that we have been and remain willing to consider any proposal from any party including Microsoft if it offers our stockholders full and certain value…In short, Yahoo’s board was at every point in this process prepared to enter into a transaction with Microsoft that would maximize stockholder value–and included certainty of value and closing. What Yahoo’s independent board refused to do was to allow control of this company to be acquired for less than its full value.”

Microsoft sources said Bostock’s letter reads more like a classic cover-your-you-know-what ploy than it does an accurate recounting of the talks.

“Everything they did said no to us,” said one exec. “That was patently obvious to everyone.”

Said another: “We don’t know whether it is better to say nothing and let this just play out, or make it clear again that Yahoo was never cooperative with us.”

I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares. By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

But clearly a deal is not to be.”

Still, some at Microsoft think his points bear repeating, especially if Yahoo keeps telling the story of their star-crossed talks its way in the proxy fight with Icahn.

But while BoomTown would dearly love even more drama in this potboiler, it is likely the company will choose the latter course–keeping Microsoft’s mouth shut as Icahn does all the dirty work for them.

Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work

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